Struggling telco One.Tel has announced that the company is insolvent, withdrawing its recently announced renounceable rights issue and appointing administrators to the company.
The company notified the ASX of a suspension of its shares before announcing Steve Sherman and Peter Walker of Ferrier Hodgson as administrators.
The announcement came after One.Tel’s auditors, Ernst and Young, informed the Board that its investigations revealed that the financial position of the company was not as reported to the Board on May17, and that a capital raising of $132 million would be insufficient to keep the company solvent.
The Board also heard that a capital raising sufficient to meet the funding requirements of the ailing telco was not available.
“The Board believes the appointment of the Administrators is in the best interests of One.Tel and all its customers, staff, creditors and shareholders,” the company said in a statement.
Ernst and Young auditor, Steve Sherman, said it would be business as usual for staff and customers of the telco while a review of its operations was underway.
“We will review One.Tel’s operations and hold discussions with its major creditors to identify the best means of maintaining value for the benefit of its stakeholders,” Sherman said.
“In the interim One.Tel will continue to trade as a going concern”.
Publishing and Broadcasting Limited (PBL) chairman, James Packer, and News Limited chairman, Lachlan Murdoch, have issued a joint statement expressing their anger at the One.Tel announcement.
“Like all shareholders we are angry,” Packer and Murdoch said in a statement.
“We have been profoundly misled as to the true financial position of the company”.
“We intend to explore all remedies available to us”.
“We welcome the Administrator’s assurance that One.Tel would continue to trade as a going concern and that they would seek to identify the best ways of maintaining One.Tel’s value for the benefit of all shareholders and creditors,” the statement said.
Both media companies invested $709 million into One.Tel in February 1999, with News Limited adding $200 million to that amount in November that year.
PBL ceo, Peter Yates, and News Limited deputy ceo, Peter Macourt, said that the media companies’ due diligence investigation into One.Tel revealed that the financial position of the company was not as reported to the Board on May 17, nor at earlier Board meetings as they understood it.
“The Board was advised on May 17 that the proposed $132 million rights issue was prudent but not essential,” the ceos said in a statement.
“However, ten days later the due diligence by the company’s auditors revealed that the $132 million rights issue would still be significantly insufficient to assure the company’s solvency”.
Meanwhile, Perth-based Amcom Telecommunications has moved to assure investors that the company has minimal exposure to One.Tel and will not be significantly affected by the telco’s collapse.
One.Tel has an annual contract with Amcom of no more than approximately 1% of Amcom’s total revenues, the company said in an issued statement.
While $67,000 of that contract is outstanding, Amcom is not a debtor of One.Tel, the company said.